Wednesday, February 23, 2005

More Accounting Problems At Fannie Mae

The regulator of mortgage giant Fannie Mae has notified its board of directors that additional accounting issues "raise safety and soundness concerns." The companys stock sold off hard initially, only to bounce back to neutral by noon, eastern time.

The issues seem to focus on internal control and manipulation of income and expense. The regulator, the Office of Federal Housing Enterprise Oversight (OFHEO), had no direct comment on the matter. OFHEO did have a release on its web site proposing new regulations requiring Fannie and Freddie Mac to report mortgage fraud.

“This rule will ensure that Fannie Mae and Freddie Mac do their part to help combat mortgage fraud,” said Armando Falcon, Jr., OFHEO Director. “The Enterprises will now have a clear obligation to report fraud and help prevent a repeat of cases like the First Beneficial matter,” Falcon said.

First Beneficial had sold mortgages to Fannie, and bought them back when it was discovered the homes were problematic. First Beneficial then sold them to Ginnie Mae, a government agency. More on that story here.


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